Bogota – Less than a month after the Colombian government cockily announced it found high-quality crude oil – possibly 200 million barrels – at its Gibraltar well, negative follow-up tests have officials ready to choke down a crow dinner.
“By the end of this week I will pronounce publicly the confirmation of the news, or I will admit the mistake,” Colombian Mines and Energy Minister Luis Ernesto Mejia told reporters Tuesday.
Senator Hugo Serrano, the leading member of Congress on oil-related issues, who revealed the recent, negative surveys on the well, says Mejia will no doubt announce this weekend that the well is not productive.
“There’s water and useless gases in that well, nothing more, and the government knows that,” Serrano told Dow Jones Newswires in a telephone interview.
Serrano cited a survey produced a month ago by state-owned oil firm Ecopetrol (E.ECO) that said the well is pumping about 5,000 barrels a day … of water.
Serrano said he fears the unwarranted bragging by Mejia and Ecopetrol President Isaac Yanovich that the government had made a big find will hurt the country.
“Colombia is losing credibility because of this issue,” he said, adding that both officials should be fired.
If the government does, in fact, retract its statements regarding the size of the find, it will be a blow to the eight-month-old administration of President Alvaro Uribe.
The Colombian government saw the Gibraltar well, located in the Siriri block in northeastern Colombia, as the discovery it needed to keep from becoming a net oil importer in a matter of four years.
Uribe said Colombia needs to find 1 billion barrels of oil reserves during his four-year term to remain self-sufficient, and this would-be discovery would have put them on track to meet that goal.
Ecopetrol spent $10 million drilling at Gibraltar during the past three months, more than a year after U.S.-based Occidental Petroleum Corp. (NYSE:OXY – News) abandoned the well, saying it only found traces of gas and water.
And when the government announced the Gibraltar “discovery” in front of lights and cameras at the presidential palace, Ecopetrol’s Yanovich even seemed to gloat that it found oil where Occidental could not. He proudly pointed out that the U.S. firm gave up its rights to Gibraltar.
Analysts say government officials may have jumped the gun on Gibraltar out of desperation for good news in a country with the world’s highest kidnapping rate, a guerrilla war that claims 3,500 lives a year and one of the highest unemployment rates in Latin America.
Indeed, when the “discovery” was announced March 3, Colombia had just ended an extremely bloody February, even by local standards.
Terrorists blew up an exclusive social club in Bogota Feb. 7, killing 35 people, making it the worst attack in the capital in decades. And in mid- February, 18 people were killed in a house bomb in a small city that President Uribe was scheduled to visit the next day.
More specifically, Colombia’s oil sector has seen a steady decline since the boom days of the late 1990s and has needed something positive. Oil, after all, is Colombia’s leading export and it accounts for about 25% of total foreign revenues.
Colombia, Latin America’s fourth-largest crude producer, expects to produce just 536,000 barrels a day of oil this year, down from 580,000 b/d last year and a record 815,000 b/d in 1999.
If Gibraltar Not Productive, Somewhere Nearby May Be
Ecopetrol originally said it found the oil at Gibraltar at a depth of 12,050 feet, after it drilled below the Barco formation, a depth level that had previously not been dug in the region.
“Things are not as positive now as they were painted by the government a few weeks ago,” said Jairo Ruiz, an engineer with the Colombian Association of Oil Engineers. “But it’s nonetheless positive that they reached the Barco formation in this region.”
All the production that has come from Occidental’s nearby Cano Limon field, the country’s No. 2 field, has come from the Mirador or other formations closer to the surface than the Barco formation, Ruiz pointed out.
“The government may have announced the oil find prematurely, but it does appear that they at least found some traces of oil,” he said. “So although Gibraltar may not be a productive well, there’s still a chance they can dig a well somewhere nearby that will be productive.”
And a spokesman for Ecopetrol, who asked not to be identified, said the study released by Senator Serrano indicating water instead of oil was in the well, was just one of many studies that have been done in the past few weeks.
He declined to discuss or provide any reports that show positive results.
Meanwhile, Colombian government officials may continue to face its critics on this issue.
A cartoon this week in top Colombian weekly Semana shows the presidential palace making a telephone call: “Who have I reached, Ecopetrol or (purified water company) Manantial?”
